Piramal Enterprises Ltd (PEL) formed a strategic partnership with Ivanhoé Cambridge, a real estate subsidiary of CDPQ (Caisse de dépôt et placement du Québec), to provide long-term equity capital to residential property developers across five main cities in India, the companies said in a statement.
Ivanhoé Cambridge has allocated an initial amount of $250 million for the purpose while PEL will commit an additional amount alongside and co-invest between 25% and 50% for each transaction.
Ajay Piramal, chairman, Piramal Enterprises, said, “Given the scale of our existing real estate offering and the roster of existing developer relationships, the partnership will enable us to execute on compelling opportunities to deliver high quality residential developments in the local markets that we service.”
“The alliance with Ivanhoé Cambridge is in consistent with our philosophy of acting as a provider of capital and underlines the confidence reposed by institutional investors in our abilities as a fiduciary,” said Khushru Jijina, managing director, Piramal Fund Management.
He said the timing is opportune for the provision of both pure and preferred equity capital at an early stage in the project life cycle. “Such equity funding with Tier 1 development partners will enable us to deploy capital over a longer time horizon and facilitate participation in larger projects with the ability to generate returns across real estate cycles,” he said.
The development comes at a time when the real estate investment ecosystem is dominated by debt transaction. Given the sad state of affairs of real estate market, developers have been going for multiple rounds of debt financing to stay afloat in the market. The stressed condition in the market presents a suitable opportunity to equity investors to come in as long-term partners. While the need for equity capital has been highlighted by analysts over the years, the number of equity participants has been few and far between.
The capital will be made available to a selective list of Grade A developers who have already demonstrated a track record of execution capability, corporate governance and strong return potential, the companies said.
The joint investment platform will chase deals across markets such as Mumbai Metropolitan Region, Delhi (NCR), Bengaluru, Pune and Chennai.
Daniel Fournier, chairman and chief executive officer, Ivanhoé Cambridge, said, “India’s compelling demographic and economic fundamentals combined with supportive government policies bode well for a long-term residential development strategy such as this one.”
Platform deals in real estate
This is the second platform deal for Piramal Fund Management, the real estate investment arm of Piramal Enterprises. Back in 2014, it had set up such a platform with Canadian Pension Plan Investment Board (CPPIB) for residential properties. However, the joint investment platform has so far been able to seal only one deal.
Piramal fund manages a host of real estate-focused funds besides lending capital to developers from debt books. Its real estate book stood at around Rs 35,000 crore as on 31 December 2016.
Meanwhile, platform transactions have been on the rise in the real estate space in India. Global investors, including sovereign and pension funds, have forged joint investments platforms to take exposure in the market across the segments of realty market.
As first reported by VCCircle, Abu Dhabi Investment Authority (ADIA) recently joined hands with Mumbai-based Lake Shore India to pump in capital in retail properties. Dutch pension fund APG bought three exiting malls of Virtuous Retail, the mall development arm of The Xander Group, and has agreed to pump in more capital through a platform structured deal.
APG also recently formed its second tie up with Godrej Properties to develop residential properties across the top markets of India.
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